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In a mutual fund industry, there are three major classifications for all the schemes or investment mandates running in the industry. Although the industry has got many of these different schemes available for the investor but these different types of schemes are grouped under certain classifications. So that there is better understandings for an investor before he decides for investing in any of these mutual funds in india

Foremost of the classification is a close-ended or an open-ended fund. Under this category of classification the scheme can be either of the two; close ended or open-ended. Every scheme or mutual fund investment depends upon whether the scheme is an open ended or a close-ended.

Any investor who has an option of investing into a scheme of a mutual fund where he can readily redeem or buy units at any given time from the fund itself is termed as an open-ended mutual fund. Whereas if an investor gives his money to the mutual fund or invests his money in a fund and awaits until a given maturity period, before he can redeem and get his investment back is termed as a close-ended types of mutual funds

Hence, the open ended fund is the one that sells and repurchases units all times. When the fund sells units, the investor buys them from the fund and when the investor redeems them, the fund repurchases them from the investor. (The investor buys or sells these funds or the units of the funds based on the prices that are prevailing at that point of time when he decides to act upon his buying or selling decision.)

Mutual funds are brought in terms of units and there is a price that is based on these units, which is known as the net asset value or the NAV. Whenever an investor buys or sells mutual funds he is actually purchasing/selling the units of the mutual funds, which has a value of price on it mutual fund investing

As definition terms, NAV per unit is obtained by actually dividing the amount of the market value of the fund’s assets and other incomes minus the fund liabilities and further dividing it with the number of units outstanding. That is why the number of units outstanding goes up or down every time the fund sells the units or repurchases existing ones. In other words, the unit capital for an open ended mutual fund is not fixed but a variable one. When a sale of units exceeds repurchases the fund increases in size and when repurchases exceeds sales the fund size shrinks.

Contrary to the open-ended, is the close-ended one in which the fund house is not obliged to keep selling new units at all times. Though it has the obligation to repurchase the units tendered by the investor at the time of maturity of a closed ended fund.how to invest in mutual funds